2016 (3) TMI 170 - AT - Income Tax

Disallowance of foreign travel expenses - Held that - There is no dispute on the genuineness of the expenditure in both years. The dispute is only with regard to the employees travelling to the shareholders meet where the employees are not the shareholders. The business purposes of the assessee are not sufficiently and adequately demonstrated before us. Therefore we are of the opinion both appeals should be remanded for one more round to the file of the Assessing Officer for adjudicating the issue afresh. The assessee shall demonstrate where exactly the meet took place why Shri Agarwal travelled to Singapore how Shri Agarwal is connected to the shareholders meet when the assessee is a shareholder in the joint venture company. Further the assessee shall also demonstrate as to what is the fact on the disallowance made by the Assessing Officer in the earlier year on account of foreign travel. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Disallowance of foreign travel expenses for assessment years 2003-04 and 2005-06.

Analysis:
1. The case involved two appeals concerning the disallowance of foreign travel expenses. The Commissioner of Income-tax (Appeals) upheld the additions, leading the assessee to appeal before the Tribunal.

2. For the assessment year 2003-04, the assessee spent a sum on foreign travel for a shareholders' meet in Indonesia. The Assessing Officer disallowed the expenses, questioning their business purposes. Similar facts were presented for the assessment year 2005-06, with expenses incurred for foreigners traveling for a similar meet.

3. The Commissioner of Income-tax (Appeals) ruled that expenses related to the joint venture's shares investment were not allowable under section 37 of the Act. Dissatisfied with this decision, the assessee appealed to the Tribunal for both assessment years.

4. The assessee argued that the travel was undertaken by company employees, not management or their spouses, justifying the expenses for business purposes. However, the Commissioner's objections were raised regarding the location of the meet and the connection of the travel to the shareholders' meet.

5. After reviewing the orders and hearing both parties, the Tribunal found no dispute on the expenditure's genuineness but questioned the demonstration of business purposes. Consequently, the appeals were remanded to the Assessing Officer for further adjudication. The assessee was directed to clarify the meet's location, the purpose of travel to Singapore, and the connection of the travel to the shareholders' meet.

6. Ultimately, the Tribunal allowed the appeals for statistical purposes, remanding the case for additional clarification and assessment by the Assessing Officer.

7. The order was pronounced on September 11, 2015.